UPDATE 1-Peru eyes new fiscal boost, trims 2014 growth view again

Reuters Staff

3 Min Read

(Adds minister's comments on new fiscal boost, recasts first paragraph and headline)

LIMA, Oct 1 (Reuters) - Peru's finance minister said on Wednesday the government will probably boost spending to jump-start economic growth, which he now sees slowing to 3.5 percent or less this year - below his estimate of "under 4 percent" two weeks ago.

The government has downwardly revised its estimate for this year's economic expansion several times from its forecast early this year of around 6 percent, in the face of Peru's weakest growth rates in five years.

Alonso Segura, who was sworn in as President Ollanta Humala's second finance minister last month amid criticism of the government's response to the slowdown, called growth this year "mediocre."

"We think it is highly probably that we will carry out some additional fiscal boost for short-term" growth, Segura said, adding that officials are evaluating the fourth-quarter budget.

The new measures would build on reforms President Ollanta Humala has introduced this year aimed at countering the sluggish growth - from relaxing environmental rules to increasing spending on health and education.

Segura said the economic expansion this year will probably be close to the central bank's new forecast of 3.5 percent.

"We think that, indeed, the figure for growth this year is going to be close to that, close to 3 percent and a bit more, maybe 3.5 percent or a bit less," Segura said in a televised congressional presentation.

Peru is a top global producer of copper, gold, silver and zinc. Mining has typically generates 60 percent of its export earnings and some 15 percent of gross domestic product.

Economic growth has slowed over the past year as exports have fallen on weaker global mineral prices and softer demand and as mining investment and output has ebbed.

Segura's new growth forecast for 2014 is closer to the growth rate logged so far this year - 2.98 percent in the first seven months of 2014.

Peru averaged annual growth of 6.4 percent in the past decade.

The government and central bank have said the slowdown likely ended in July, when economic growth picked up slightly to expand by 1.16 percent year on year.

But preliminary government data points to still-tepid year-on-year growth in August.

Mining and hydrocarbon activity shrank 3.51 percent in August - the sector's fifth straight monthly contraction and a steeper fall than in July. Consumption of cement, a barometer of construction activity, fell for the second month in a row.

Economic data for August will be released on Oct. 15.

On Tuesday Peru's central bank widened its forecast for this year's trade deficit to $3.2 billion, the biggest shortfall in at least two decades, and trimmed its growth forecast to 3.5 percent.